Bunk is a slang expression for absurd, ridiculous, nonsense. There is more of it in the world of investing than you might imagine: So much so that Ken Fisher identifies 50 examples.

The successful U.S. investment manager and longtime columnist with Forbes magazine aims to refute all 50 in his latest book, for which he coined the title Debunkery.

The title is much longer, with the hot-button words Wall Street and Money-Killing Myths. But the book is a quick read, thoroughly entertaining, and yet credible. It’s a revealing antidote to con artists, flimflam, gouging, mania, gold bugs, permabears and assorted investment traps.

Fisher displays an unflagging optimism in the resilience of capitalism, American ingenuity and the ability of stocks to outperform bonds — at least in time spans of 20 years, which is all it took Mark Zuckerberg to be born, go to school and found Facebook.

His optimism will never be fully tested. But, so far he argues, stock prices have shown an undeniable record of rebounding in the face of adversity, including terrorist attacks, increased government debt, electoral change, slow growth and high unemployment.

“Capitalism is too strong a force to be kept back by cowardly thugs,” he concludes after illustrating the record of stock market recoveries after several bombings and the attack on the World Trade Center on Sept. 11, 2001.

Fisher, whose company manages $32 billion (U.S.), devotes considerable space to persuading readers they need to invest in stocks to keep ahead of price inflation, and get used to big swings from year to year.

But here is a sampling of what he calls bunk, and how he deals with it:

Dollar cost averaging — lower risk, better returns: If you have lump of cash to invest, “more often than not stocks move higher. You benefit more from being invested more of the time than you do trying to avoid near-term wiggles.”

Baby boomers retire, world ends: “Demographic shifts just can’t have the power to drive stocks — up or down — the way so many think they do. . . Markets move based on surprise and urgency and nothing else.”

Variable annuities are all up side, no down side: “The bigger the salesperson’s commission is on something, typically the worse it is for you, the buyer. He is getting that huge commission to sell you something that is bad for you. . . and if you truly understood the product you would never, ever buy.”

Passive investing is easy: “If you’re considering a passive equity strategy, your time horizon isn’t 3.2 years (the average holding period for equity mutual funds) it’s almost certainly very much longer.”

In the meantime, “it’s so easy to succumb to greed, fear, pain, regret, overconfidence, and your Stone Age brain. So get some form of adviser... someone who, every time you try to stray from your long-term strategy, reminds you who you are, and that you’re not Warren Buffett.”

Low price-to-earnings ratios mean low risk: “Using P/Es to forecast risk and return over any reasonable time period is about as useful as using a Ouija board. Like all commonly used valuations, their predictive power is long since gone because anyone can get them lightning fast on the Internet and markets pretty efficiently discount all commonly used valuations.”

All hail the mighty Dow! “Very many investors, both amateur and professional are fond of saying the market went nowhere from 1965 to 1982 — 17 famous years of no return. When they say that, they mean the Dow (Jones Industrial Average) went nowhere. But that’s nonsense. The S&P (500, a better reflection of the reality of the U.S. stock market) over the same time period annualized 7.1 per cent — below average but still positive.”

As much as I like Fisher’s book, readers should note in that final example he does not compare investment returns after adjusting for inflation, as Yale University economist Robert Shiller would always do.

More on thestar.com

We value respectful and thoughtful discussion. Readers are encouraged to flag comments that fail to meet the standards outlined in our
Community Code of Conduct.
For further information, including our legal guidelines, please see our full website
Terms and Conditions.